For those dreaming that maybe today’s excessive valuations in most financial assets can resolve in a virtuous end of gentle mean reversion, or suddenly soaring GDP, sales and earnings that will miraculously ease current cash flow strains, we offer the following graphic of the once revered and now loathed mining sector. A new study finds that there are 589 publicly listed mining companies (roughly 40%) that should no longer be listed as they do not meet the continuous listing requirements required by the exchanges to have working Capital or Financial Resources of the greater of (i) $50,000 and (ii) an amount required in order to maintain operations and cover general and administrative expenses for a period of 6 months. See: A Miner Problem, $2 billion in negative working capital.
Notwithstanding their ineligibility, these nearly 600 companies so far still remain listed on public markets, because they generate fees for a variety of service providers such as lawyers, auditors, banks, and the exchanges themselves. Investors in this once loved sector, have already been pummeled with capital implosion. However, speculative boom/bust cycles cannot complete, until the grotesque excesses of the prior bubble are finally culled through the cleansing recognition of write-offs, write-downs and bankruptcy. Then the cycle can begin again…
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